Intersect ENT, Inc.
Q4 2017 Earnings Call Transcript

Published: 28 Feb 2018

[Operator:]

Good afternoon, and welcome to the Intersect ENT Fourth Quarter and Year 2017 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Jeri Hilleman, Chief Financial Officer. Please go ahead.

[Jeri Hilleman:]

Thank you, Denise, and thank you all for participating on today’s call. Joining me today is Lisa Earnhardt, President and CEO. Before we begin, I’d like to remind you that we will make forward-looking statements within the meaning of federal securities laws. Actual results and timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, our outlook for financial performance, sales force growth, clinical studies, approval of new products and indications and procurement of reimbursement codes and coverage, which are based upon our current estimates and assumptions as well as other risks detailed from time to time in the reports we file with the SEC. We disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein. I’ll now turn the call over to Lisa Earnhardt. Lisa?

[Lisa Earnhardt:]

2017 was a banner year for Intersect ENT. We started the year with the NDA submission of SINUVA and ended the early approval of this innovative product. The FDA also approved PROPEL Contour in February which we then rolled out via successful and impactful launch. The use of the PROPEL family of products, PROPEL, PROPEL mini and PROPEL Contour continue to grow in frequency and in breath, emerging as the standard of care in several large markets across the country and proving immune to last year's Medicare reimbursement changes. We also expanded upon the strong foundation of clinical evidence for our drug eluting sinus implant with highly visible scientific presentation and the submission of several clinical and healthy economic data publication. Finally and by no means least, we established the infrastructure needed to commercialize SINUVA, our first product regulated as a drug and are poised to launch the product that we believe will deliver the next way approach for Intersect. Diving into these accomplishments, we launched Contour in the second quarter and grew Contour demand to the point where it now represents about a quarter of our product mix with over a 1,000 accounts purchasing our newest implants. Adding Contour has enabled us to offer a PROPEL implant to treat nearly all patients undergoing sinus surgery, as a result we are seeing positions begin to shift their thinking from whether or not to use PROPEL in a given case to instead which PROPEL should be used. We also reinforce our commitment to evidence-base medicine this further publications and presentations highlighted by the November publication of the progress study of Contour in [JIMA]. As a reminder, this was a prospective randomized blinded trial, which demonstrated that frontal sinus surgery followed by the placement of PROPEL Contour reduce the need for postoperative interventions by 65%. We've made great strides throughout the year toward our ultimate goal of making localized drug delivery the standard of care for products sinusitis sufferers. We estimate that PROPEL implants are now used in 1 into 8 sinus surgery, a meaningful step up from 1 in 10 at the end of 2016. Additionally, 1 in 3 ENTs use our product representing approximately 2,700 accounts at increase of 10% over 2016. On the reimbursement fronts, we were gratified to see that United Healthcare retired their investigational coverage policy on PROPEL. This change means that United policyholders have access to PROPEL, raising the level of covered lines to approximately 29%, while this is a favorable development, this change does not likely to have a dramatic impact on our business. In the hospital in ASC where PROPEL is paid for the supply from the established facility fees, administrators may know this change favorably at context for ongoing PROPEL usage. This policy change could also support in office use to PROPEL particularly for PROPEL Contour, although we expected to remain a smaller portion of our business overall for at least the near-term. Turning to our sales force, we are well positioned to continue to drive adoption of PROPEL into launch SINUVA. We recently expanded our sales management via promotion of two territory managers so retail managers and we ended 2017 with a 110 field representatives including 82 territory managers and 38 sales consultants. Our annual productivity per rep grows to 1.3 million in revenue an increase of almost 20% over 2016. We anticipate continuing to grow our sales force as we roll-up SINUVA aiming for 10% to 15% growth over the course of the year. In addition to our success with the PROPEL family in 2017, the year was crowned off course with the early approval of SINUVA. We are thrilled to offer this novel targeted treatment for recurrent nasal polyp disease giving patients a new approach to the current regiment of repeat surgeries, high dose oral steroids and intranasal sprays and rinses which rely heavily on patient compliance. I we will discuss our SINUVA launch plans in a few moments after Jeri takes you through our recent financial results and outlook.

[Jeri Hilleman:]

Thank you, Lisa. Our 2017 revenue of $96.3 million reflected a 22% growth in our PROPEL product business driven largely by the introduction and growth of PROPEL Contour. Our gross margin for the year was consistent with our stated expectation of 84% and our operating expenses of $98.4 million were similarly on track. And finally, we ended the year with the balance of cash, cash equivalents and short-term investment of $102.3 million approximately was the same balance that we had at the start of the year. As we anticipate 2018, we're reaffirming our outlook for a $111 million to a $116 million in total revenues. We also continue to expect launch SINUVA in the second quarter and expect this SINUVA will generate about 8% of total revenue for the year. This deal allows for the launch focus to have some impact on PROPEL sales as our sales force works to promote PROPEL and to introduce SINUVA. We've begun launch prep activities quarter and reaffirming our first quarter revenue outlook of $23.2 million to $23.7 million. As we continue to scale manufacturing and incorporate SINUVA, we expect to achieve gross margins for the year in the range of 81% to 82%. This range is consistent with the steps we’re taking both to advance production of Contour and to launch SINUVA. Specifically, we will be adding needed overhead and allowing for learning inefficiencies as we transition to large scale commercial production of SINUVA. In addition, we're planning to expand capacity midyear through the addition of the third manufacturing line. Our outlook for 2018 operating expenses is $113 million to $115 million, we estimate that approximately 0.5 of the year-over-year increase in operating expense is due to growth in sales and other headcount, a third to or about $5 million from stock based expense given the strong rise in stock price from a year ago, and the balance from SINUVA related promotion and services. We're maintaining our R&D spending at about $20 million mark as we continue to develop our pipeline. I will now turn the call back to you Lisa.

[Lisa Earnhardt:]

Thank you, Jeri. As we move to our last topic, the launch of SINUVA, I first like to thank the Intersect team who has worked tirelessly to get us to this point over the course of many years. The approval and launch of SINUVA is a significant accomplishment and represent the start as an exciting new chapter for us. We’re marking off items from our launch checklist daily including the big task of sales force training, position targeting plans and market access readiness. We’re not able to confirm the start of our targeted launch is April. So dive into our launch readiness in more detail, we convey the entire commercial organization for our national sales meeting at the end of January and in that had in-depth training on all aspects of SINUVA and the launch. The sales team has initiated a position out recent as anticipated the earlier response has been positive at ENT seek alternative treatment options for their challenging polyp patients. Our targeted position rollout plan is in place into the set SINUVA to a local number of physicians in each territory and ramping over the first two quarters of loss, balancing inbound position interest with other considerations. Our strategy behind the targeted launch is sound and that we recognized that the ENT community has not had extensive experience accessing physicians administered drug, so some education is in order. Fortunately, the actual placement of SINUVA is relatively straight forward, but as with any new products, we will be sharing best practices to share the best outcomes. Our goal is to write a fall ENT Society meetings a strong cohort of physician through adopted SINUVA intimate practices and then move into a boarder launch in the fourth quarter. Finally, we have our market access network in place and ready to go. Our overarching goal with SINUVA is not only to assure the best clinical outcomes but also to optimize the patient and provider experience throughout the entire process. As such, we have engaged several market access partners to help support us, our customers and patients. Firstly, TrialCard, the largest provider of technology enabled patient access programs in the country who will provide reimbursement hub services to providers on our behalf. We upgraded this program at XENT. Through this program, dedicated staff will speak with providers and help them to navigate product access choices in reimbursements. And such personnel will help providers to cure product by referring them to our market access partners and they already filled the initial provider inquiries. For providers who prefer to purchase SINUVA directly also known as buy and build, they may do so through our specialty distributor partner, Besse, which serves physician offices or Amerisource Specialty Distribution or ASD, which serves hospital clinics. Physicians who do not want to stock the product in their offices will simply send a prescription for SINUVA to one of our specialty pharmacy partners Novo or Gentry. Both are now live and happy to receiving limited prelaunch initial perception from providers and have also begun the process of securing coverage. Once the patient has cleared for the procedure the specialty pharmacy will shift the product directly to the physician office replacement. All of our partners are well established industry veterans and leaders in the provision of physician administered drug to medical specialty. We do expect the mix of use of both channels of access to SINUVA and are confident that both actions will be customer friendly efficient and reliable. Regarding reimbursement, we have submitted our application to CMS for a product specific J code and continue to expect that to be in place effective January 1, 2019. In the interim, our specialty pharmacy partners and providers will report the unassigned code J3490 with the SINUVA NDC number. This is routine practice for any newly approved drug since J codes are only issued once per year. We have also initiated payer outreach to ensure patients have access to SINUVA. We believe the value preposition of SINUVA as an alternative surgery in patients with recurring disease will be attractive to payers and integrated health plans. We are introducing SINUVA at a least price of $12.75 per implants, assuming two implants are used for procedure this compares favorably against sinus surgery even with repeat usage. It is important to know as it's typical with pharmaceutical products that the price per implant that will be recognized as revenue will be lower after deducting distribution fees and discount for government programs in other product support programs. Our estimate for the net recognized price for SINUVA remains as previously communicated at roughly the price to PROPEL. In closing the call, I'd like to share some recent feedbacks from a physician who wrote me about SINUVA and I quote. This is very exciting. I've been talking to my patient about it for months and truly look forward to using on many of my patients in the future. That sentiment is what SINUVA is all about and why we are here to improve the care of products sinusitis for patients and the ENTs that treat them. We now offer suite of products designed for us across the continuum of care for sinus sufferers and are well positioned to deliver on our goals in 2018 and beyond. Thank you for participating in the call and for your interest. Jeri and I will remain on the line to address your questions, so Denise would you mind opening up the line please.

[Operator:]

Certainly, we will now begin the question-and-answer session. [Operator Instructions] And your first question will come from Mike Weinstein of JP Morgan. Please go ahead.

[Unidentified Analyst:]

This is actually Alan on for Mike. So just kind of going to you this starting to SINUVA lunch, so clearly you guys have a lot of momentum behind it, it seems like from our point view obviously guys seem to be ahead of schedule really in time setting up all those special distributors such the pharmacy contracts. So I know you guys are really looking to make sure you get the launch started correctly, but why couldn’t I guess the launch started a bit earlier than expected given this kind of pace that you guys have set so far?

[Lisa Earnhardt:]

Yes, we did communicate on our prepared remarks that we do anticipate, the targeted launch will be in April and our real focus there is to make sure from physician prospective and a patient prospective, the experience is topnotch from clinical outcomes to getting access to the product, and we do want to make sure we walk before we run, and we really do focus on a number of physician because there will be learning, there will be learning for us, there will be learning for the physician community. We do believe we’re well prepared, but we do think it's the right thing to do to take a couple of quarters to make sure we're laying an extraordinarily strong foundation before we launch broadly.

[Unidentified Analyst:]

And then with respect to ENCORE, you guys finished enrolling that and obviously wasn’t necessary for the approval of SINUVA, but given it's kind of the valuating the efficacy, the safety of repeats SINUVA usage in one patient. You think that physicians will kind of limit the use to SINUVA until they kind of see that data or will that to see more like reinforcement to make them feel more confident and for striving in multiple times a year.

[Lisa Earnhardt:]

Yes, I believe the ENCORE study which was looking repeat usage for the first time, we'll send you but really be additive for the positions. Mometasone furoate which is a drug we used with SINUVA and all of our products and a huge in a number of intranasal steroids spays as well. It's a very well characterized drug and I don’t believe based on my interactions with physicians I think would wait for the ENCORE date. I truly believe it is additive to the robust clinical evidence we've already generated for SINUVA.

[Operator:]

The next question will be from Bob Hopkins of Bank of America Merrill Lynch. Please go ahead.

[Bob Hopkins:]

So a couple of questions. Apologizes, there is four or five companies have reported, so I apologize if I miss something here. But just recently start off, is there any changes in the guidance that you're articulating today, subtle or otherwise, as it relates to the timing and outlook for the SINUVA launch or the outlook for your base business. And kind of relative to think that you said in the recent past, I'm just curious if there is any change to guidance on the base business sort of SINUVA timeline or launch expectations?

[Lisa Earnhardt:]

Everything is fairly consistent with what we have previously communicated, but one thing I just do want to call out specifically is that, as historically we had talked about Q2 as the timing for the targeted launch for SINUVA and we did just as a reminder to clarify in April, we are in a position to be able to launch April on the side of path, but it doesn’t change our outlook for the year. So we still then communicate that we anticipate SINUVA will represent about 8% of our 2018 revenue.

[Bob Hopkins:]

And I thought I heard something on the J code process. Is that just reiterating what you've said previously or is there something new there?

[Lisa Earnhardt:]

Yes, that's reiterating what we said previously that means you continue to expect that to be a permanent J code for our products, specific for our product as to be in fact January 1, 2019 as previously communicated.

[Bob Hopkins:]

And then relating to the business sort of excluding SINUVA and I appreciate the guidance and the philosophy behind the guidance given the new list of this process. But I guess I know it's pretty early and the product hasn’t launched yet, but the guidance assumes a slowdown in the base business growth rate in part because of the SINUVA launch and the focus on the SINUVA launch. I assume that thus far that disruption hasn’t happen because the launch hasn’t really happened. But I'm just curious, is that guidance more reflecting what you anticipate conservatively might happen? Or is that guidance reflecting what you're already seeing happened today?

[Jeri Hilleman:]

Bob, this is Jeri. We set our guidance for the start the year at the beginning of the year and we're really up holding that now because we believe things are on track and that guidance looks consistent with how we've given guidance in past quarters and also reflective of the fact that we were doing a quite a bit of work with the sales force preparing for the launch. So while that you are right, this launch technically hasn’t happened. Our internal activities and preparations certainly have started this quarter. And then we do expect and are allowing for some focus on SINUVA that could come a bit at the expense of PROPEL and PROPEL mini growth rate, as the sales force focuses a bit on the targeted launch that will have for the next couple of quarters. So we're really reaffirming our view of things that we said at the beginning of the year and that continues to be our outlook.

[Bob Hopkins:]

But I just curious is that something you're seeing now or is that something you are allowing for any guidance?

[Jeri Hilleman:]

It's something we allowed for it in our guidance.

[Operator:]

The next question will be from Richard Newitter of Leerink Partners. Please go ahead.

[Unidentified Analyst:]

This is Jamie on for Rich. So I guess the quick question that I have would be around the ENCORE trial. When do you guys think that you'll be getting some sort of data readout on this trial? And then how quickly could this potentially be an effective label change? And then kind of a follow-up to that would be. What are you estimating the incremental market opportunity to be up off of your SINUVA estimates with repeat use added?

[Lisa Earnhardt:]

Yes, I'll take the first part of that question and Jeri will discuss the latter. So, this is Lisa. So the question about the ENCORE trial and the timing, so we have completed that enrollment, we would expect data readout in the second quarter of 2019. So any labeling change if it were to happen, we probably would be 2020 or sometime thereafter the data was available. And Jeri do you want to comment a little bit about, what impact if any on the market opportunity>

[Jeri Hilleman:]

Sure, as we looked at '18, which is really the only year we've given guidance for you, there is not much repeat use in there, if any because of the nature of the targeted launch and timing of launch and so forth. So I think that's a more interesting question to think in the future years where we do thinks that there will be some repeated use as a product and we can speak more specifically when we give guidance for those years.

[Unidentified Analyst:]

And then just quickly on gross margins, so you're guiding that 81% to 82% in 2018. Any reasons why we shouldn’t expect this to kind get to the 83% to 84% level in 2019 and beyond?

[Jeri Hilleman:]

Yes, in general, the kind of things that we're investing now the overhead adding a third line, improving efficiencies getting experienced with SINUVA or the kinds of things that we would expect to improve overtime. So we do think that as we make the investments this year, as we ramp volume that our margin should improve.

[Operator:]

The next question will be from Matthew O'Brien of Piper Jaffray. Please go ahead.

[Matthew O'Brien:]

Couple from just, just to dig in a bit more on this SINUVA rollout and my apologies, I know Contour is doing very well as well PROPEL, but obviously this is the focus for most investors right now. So can you just talk a bit more about that you've got a number of clinicians that are using PROPEL, using Contour. How many you're going to go after right away? How that’s going to be ramp throughout the course of the year? And then, as far as penetrating the patients that could be good, can use for the products, what percentage are you kind assuming as your modeling out that 8% of sales?

[Lisa Earnhardt:]

Yes, so our focus Matt will really be on our current customer base so that a found meaningful role for localized drugs in their practice already with our PROPEL product. As you know we currently work with about one in three ENT, and so we will be targeting some segment of them, very similar to how we did with counter out of the gate as we led to select physician partners to begin with and then expended more broadly. We would anticipate the first couple of quarters that would once again be a subset of our existing customers and then we will spend beyond there.

[Matthew O'Brien:]

Okay fair enough, and then as far as that coverage update from United obviously that’s good news. I know you don’t want to overstate it too much. Can you talk a little bit about their decision to go ahead and remove that language? And then secondly, are you aware of the other --- the larger providers that are damaging similar type of coverage policy?

[Lisa Earnhardt:]

Yes, the payers do typically review their policies on an annual basis, so this is part of I believe the United sort of standard review process. And I do think the existence of the policy did create some confusion given that for the majority of procedures PROPEL is treated just like all the other supplies that are utilized. And so I think that is probably a big impedance for them just to renew their policy all together given that it's typically doesn’t impact payments, and back and buying with continuing matching of critical evidence as well as strong physician support. So, we would anticipate other payers as well continuing to look at their policy. Once again, this is not something that impact our PROPEL franchise today, but we do believe having positive policies or no policies all together, puts us in a great position specially as more and more get done in the physician office setting of care.

[Operator:]

The next question will be from Chris Pasquale of Guggenheim. Please go ahead.

[Chris Pasquale:]

Lisa, I am just one digging a little bit more on the plans between now and launch. This sounds like things are going very well, you guy are in a good position. Are there boxes you still need to check before you feel like you are ready? Or is it really just a matter of firming up the foundation you've already put in place?

[Lisa Earnhardt:]

Yes, a lot it's just the foundational work just to make sure we're ready to give all the green light, there are cylinder sort of procedures that we have in place anytime we're launching a new product where we check off those boxes and we're well out of way to doing just that. So we're in -- we don’t see anything that would be an impediment for our launch versus the full team ahead here, correct -- the exciting time at the Company.

[Chris Pasquale:]

Very exciting, so the second question. Can you go into some more detail on the economic arguing you are making to payers with SINUVA? What assumptions are you using in terms of the cost of surgery, the frequency with which of these patients and if have any go back and have a repeat surgeries, I know the frequency of treatment with SINUVA to really make the case that is a cheaper option even a 12.75 an implant?

[Lisa Earnhardt:]

Yes, so it's important to note that in all of our two randomized trials, 100% of the patients enrolled were indicated for revision surgery. So that allows us to make a pretty compelling health economic argument because obviously after the treatment of SINUVA that number is drastically reduced. And so what we've found is that argument relatively straight forward from a health economic standpoint. Sinus surgery as you know depending on the payer and the geography and the side of the procedure, it could be anywhere from $8,000 of reinvestment up to about $14,000 or $15,000. So it's a pretty big range, but on average we're looking at actual commercial payer information which is that's the most compelling because they know exactly what they are treating and what they are -- what patients are treating, what the cost are associated with that. And we found our early conversations with them. They found the alternative release quite compelling even with repeat usage of SINUVA i.e., maybe more than once a year.

[Operator:]

The next question will come from Kaila Krum of William Blair. Please go ahead.

[Kaila Krum:]

So first I guess on SINUVA rollout. I mean I'm looking at your account base of 2,700 at this point and just SINUVA how Contour ramped over the course of last year, understanding that they are not going to be bought on or similar. But the fact that there is already one quarter of your product mix, I mean, is there any of reason that SINUVA couldn’t be in that sort of one quarter of your accounts one-year post launch?

[Lisa Earnhardt:]

We haven't given guidance that far out, but there is no question. The physicians said they are working with all managed and care for these patients that are revision candidates that suffer from recurring using even though we do believe the patients are out there. It's just matter of making sure that we provide the right training for the physician that we get them set up to do the procedure in the office. That's probably the major difference from Contour right, which was an existing procedure that we were able to get add at Contour as part of our existing products already on the shelf there. So this is that is new for them in terms of having a new procedure in the office. And as you are aware, there is new way to access the product that is new for the ENT that certainly overtime were convinced as a compelling market need, compelling patient demand here that will prove to be a meaningful business opportunity for even the coming years.

[Kaila Krum:]

And then just the continuation of Bob's earlier question, I mean, you comp base along you guys mentioned, does that 10% year-over-year and you're seeing strong improvements in terms or rep productivity. But I just want to be clear I mean why wouldn’t the core business again just inputs that we're taking those two tailwinds into accounts early at least 10% this year?

[Jeri Hilleman:]

Kelly, this is Jeri. It’s a really good question and one that we're going to be watching and monitoring closely ourselves. The guidance we gave really was after a lot of thought and reflection about what the time is going to be spent by each of reps, what that will product, what we expect from our accounts. So, we think the guidance we've given this time is what's appropriate. And then as we gain experience with SINUVA launch as well we'll be able to continue to refine our thinking, but we think it really as why to allow for some impact on the lunch on the growth of PROPEL.

[Operator:]

The next question will be from Kristen Stewart of Deutsche Bank. Please go ahead.

[Kristen Stewart:]

I just wanted to ask about cash flow. You guys have done very well in terms of managing your cash over the last year and I'm just worrying what your expectations are for the upcoming year in terms of class usage?

[Lisa Earnhardt:]

Yes, we certainly have been improving our cash flow from ops prospective. And if you look at the cash flow from this year 2017 -- excuse me, we didn’t have negative cash flow from ops, but it certainly continues to improve. And we think with the growth of the business, we will be able to continue to improve our cash flow, probably looking a negative cash flow again for 2018 and then continuing to improve into 2019.

[Kristen Stewart:]

And then how should we just think about I guess going back to, not to beat the dead horse, but just kind quarterly progression. I guess if we're kind of seeing or allowing for some disruption for SINUVA launch, we continue to expect to see that to be greater than in the second quarter. Is that how should we be modeling that for the base business?

[Lisa Earnhardt:]

Yes, we haven't given granularity to where we’re seeing there. I mean the first question, we're really focusing on training, not so much anything else, so the first question will give some indication when we complete that quarter. Second quarter is a seasonally strong quarter, but we'll also be navigating the launch. So I don’t think we can give any specific guidance to timing of impact. I think just a good point it's a general indication.

[Kristen Stewart:]

So it's more you guys allowed for some amount of disruption mainly just related to training and maybe pre-preparation for the launch maybe not necessary disruption for continued lack of the focus for the rest of the year. Is that fair?

[Lisa Earnhardt:]

No, I think Q2 and Q3, I characterized it during the initial introduction to physicians and that can be time consuming. And then as we move from that into a broader launch that also carried into Q4, so I think it's really a factor that can affect us throughout the year.

[Kristen Stewart:]

Okay, but it sounds like there is a healthy dose of some conservatism that you guys have applied in there?

[Lisa Earnhardt:]

We will see, we're really at this point allowing for what we think is for best view. Under a number of scenarios, we obviously want to make sure we put forth a view that we can meet and we will get some of the more experience and be able to update.

[Operator:]

The next question will be from Suraj Kalia of Northland Securities. Please go ahead.

[Suraj Kalia:]

So Lisa I appreciate your commentary on SINUVA launch and training your reps, and I know it's been asked a couple of times before and I again, the way I read it as you guys are being conservative in your outlook. But maybe if I could come from a slightly different angle, the training is happening now, the launch is going to happen a few months from now. And I'm trying to understand for the organic business to step down let's say to 10% growth, let's say Q3 or Q4. Why would that be? And specifically what my question would be is what percent of your current procedures are done independently without a rep on site? I guess I'm just trying to come from a different angle and see, how much would the training and again subsequent launch of SINUVA impact Contour and PROPEL presumably most of that you are already sort of a trained in motion?

[Lisa Earnhardt:]

Yes, generally we've talked about this. There is a couple of different ways and you are right a good portion of our PROPEL intake usage is done without having a representative there. As you know, the procedure is relatively straightforward and once the physician starts to adopt that product, they tend to continue to adopt. And in that time more uses for and I think -- but as we've reflected SINUVA is new for us, it's new for our physicians. Our number one focus is making sure everyone have a great experiences there that we want to lean in to the SINUVA launch as much as we can by recognizing we're going to continue to still grow our PROPEL business. So we do believe we've provided the most appropriate outlook for the year and will look forward to commenting on that, potentially providing a shiny or crystal ball as we head into the remainder of the year. But for now, we think it's absolutely the right place for us to be in terms of our outlook.

[Kristen Stewart:]

And Lisa forgive me, I'm being jumping in between calls, if I got my numbers screwed up my apologies. Did I hear SINUVA ASP as 12.75 in your current base as 2,700? And I guess my question would be what portion of your current account base is relatively priced in Lasik and would be the lower hanging fruit for SINUVA?

[Lisa Earnhardt:]

Yes, it is important to recognize that SINUVA is used in a completely different setting of care as well as situation. With SINUVA, it is recommended there is pharmaceutical achieves as the standalone procedure in the office setting. So it's a little bit apples and oranges to compare that to that PROPEL price. So, it's really more just some of the questions we've talked about earlier is really looking at more taking a step back and looking at the value or bringing to healthcare system and recognizing that we're offering a less invasive, more cost effective solutions for these patients in the office setting. So, we think it's a really meaningful alternative to revision surgery and do believe our initial input from both physicians as well as payers and integrated delivery systems is that it will be well received.

[Kristen Stewart:]

And finally Lisa, did you all give the number of reps on hand exiting FY17 and expected exiting FY18?

[Lisa Earnhardt:]

Yes, so we ended our 2017 with the 110 sales representatives, 82 of whom were territory managers, and we do expect to grow around 10% to 15% in aggregate this year?

[Operator:]

The next question will be from Kyle Rose of Canaccord Genuity. Please go ahead.

[Kyle Rose:]

I apologize in advance I've been jumping between call, so don’t mean if re-ask something. But I guess just from a high level prospective, I mean obviously everyone is focused on SINUVA, its big launch but its bit of a different call point and that is the office setting you've got some reimbursement, barriers in the first year at least hoops to jump through then a bit of a different just treatment paradigm broadly. I guess, how do you think about just sales force incentive and structure and you're keeping the eye on the ball, relative to the exiting base business, relative to the SINUVA launch, and I guess is that really the main takeaway from what you kind of trying to message in this guidance when we strip away the SINUVA? Is that -- there is, you're trying to bake in some potential distractions? And then, if it continues on a relative run rate basis, all thing are great.

[Lisa Earnhardt:]

Yes, Kyle, likely you're spot on there. I mean obviously there is no tomorrow without today and our sales team incentive is such. There are very much incentive to continue to drive meaningful growth with PROPEL and so I believe we'll set up there, but there is work to be done with SINUVA launch and clearly that will be an important driver of growth in the coming years. And so, we do want to be cognizant of that and that is what we been incorporated into outlook for the year.

[Kyle Rose:]

And then just question, could you remind us to just what the reimbursement milestones and the catalyst will be as we move through this year with respect to getting the standalone reimbursement for individual J code for SINUVA go in live in 2019?

[Lisa Earnhardt:]

Yes, team is typically well known to preliminary decision in the May time frame and then that would be finalized towards the end of the year and may going into effect January 1st. I know we discussed before, but I think it merits reinforcing that given that SINUVA was approved as a drug that physician administrated drug, a J code is sort of a standard process for that them. Of course obviously having that will help raise any uncertainty associated with that, but we feel very confident in our J code application our SINUVA.

[Operator:]

The next question will be from Ryan Zimmerman of BTIG. Please go ahead.

[Ryan Zimmerman:]

On the J code process you talked about the least price at 12.75. Are you going to be going after a J code at the 12.75 price or will it be similar to your existing PROPEL product price after discounts and payment to distributors?

[Jeri Hilleman:]

We will get a J code approval and then what we do is we file our ASP quarterly and that is what fits into the system.

[Ryan Zimmerman:]

Just to clarify that will -- go ahead.

[Jeri Hilleman:]

No, we're just adding, it’s based on the filing. So it's not like the J code has a specific amount associated with it as what we filed that every quarter.

[Ryan Zimmerman:]

But just to clarify Jeri, that filing is based on the average sales price, not so with sale prices. Correct?

[Jeri Hilleman:]

Which are almost the same things, yes.

[Ryan Zimmerman:]

And then on the sales force ramp in 18, the 10% to 15%, I don’t think you said it as -- I recognized it as a whole year, increase in 10 % to 15%, but is there any color or commentary that you can provide at this point in terms of split between territory managers and sales consultant.

[Jeri Hilleman:]

Yes, it really will be a mix lining as we continue to grow. I think both roles are critically important for us and have got nice job serving our customer base. Both are territory managers and sales consultants and we will look forward to continuing around the same, a same mix heading for us.

[Operator:]

And ladies and gentlemen, that will conclude our question-and-answer session. I would like to hand the conference back over to Lisa Earnhardt for any closing remarks.

[Lisa Earnhardt:]

Great, thank you all for joining us today. We certainly appreciate your interest and support and look forward to staying in touch with you all. Have a nice evening. Bye-bye.

[Operator:]

Thank you. The conference has now concluded. Thank you for attending today’s presentation. At this time, you may now disconnect your lines.